If the Checkers franchisee is a legal entity, what must each owner undertake?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
If you are a corporation, limited liability company, partnership or any other type of legal entity, the provisions of the Franchise Agreement (and, if applicable, the Development Agreement) also apply to your owners by virtue of the requirement that all your owners personally guarantee, and be personally bound by, your obligations under the Franchise Agreement (or, if applicable, the Development Agreement).
You agree to require and obtain the execution of a non-disclosure and non-competition agreement, as we may require at our sole discretion, from all of the following persons:
- (b) If you are a business entity, all Owners with at least a ten percent (10%) direct or indirect legal or beneficial ownership interest in you; all of your officers, directors and managers; and, all persons possessing equivalent positions in any business entity which directly or indirectly owns and/or controls you.
You shall procure all such Nondisclosure and
Non-Competition Agreements no later than ten (10) days following the Effective Date (or, if any individual or entity attains any status identified above after the Effective Date, within ten (10) days after such individual or entity's attains such status) and shall furnish to us copies of all executed Nondisclosure and Non-Competition Agreements within ten (10) days following their execution.
Source: Item 15 — OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS (FDD pages 64–65)
What This Means (2025 FDD)
According to Checkers's 2025 Franchise Disclosure Document, if a franchisee is a corporation, limited liability company, partnership, or any other type of legal entity, the owners must personally guarantee and be personally bound by the obligations under the Franchise Agreement or Development Agreement, if applicable. This means that the owners are individually responsible for ensuring the franchisee complies with all terms and conditions outlined in these agreements.
This requirement is a standard practice in franchising, as it provides the franchisor with an additional layer of security. By having each owner personally guarantee the obligations, Checkers ensures that there are individuals who are directly accountable for the performance of the franchise, regardless of the legal structure of the franchisee entity. This personal guarantee can cover various aspects of the franchise agreement, including financial obligations, operational standards, and adherence to brand guidelines.
Furthermore, Checkers also requires that owners with at least a ten percent direct or indirect legal or beneficial ownership interest in the franchisee entity, along with all officers, directors, and managers, execute a non-disclosure and non-competition agreement. This agreement prevents these individuals from engaging in activities that could harm Checkers's business interests, such as working for a competitor or divulging confidential information. These agreements must be obtained within ten days of the effective date of the Franchise Agreement or within ten days of an individual attaining a relevant status and copies must be provided to Checkers.
In essence, Checkers aims to ensure that all key individuals associated with a franchise operated through a legal entity are fully committed to upholding the franchise agreement and protecting the brand's interests through personal guarantees and non-disclosure/non-competition agreements.